Trade in Services

The importance of services trade to Australia

Australia is a world-class provider of a range of services, such as telecommunications, travel, banking and insurance. Services exports play a significant role in our economy and represents about 70 per cent of Australia's gross domestic product (GDP) and employ four out of five Australians.

Services also play an increasingly important role in our international trade, with services exports growing by an average of 6.5 per cent per annum between 2005 and 2010. In 2010, total trade in services accounted for 19.6 per cent of Australia’s total trade in goods and services. The value of Australia’s services exports are even greater once we take into account the export role of intermediate services inputs ('embodied services').

Australia’s priority sectors for market opening in the current Doha Round of negotiations include financial services, telecommunications, professional services, education, mining-related and environmental services.

The composition of Australian trade in services

In 2010, Australia’s six largest services exports were:

• Education-related travel services - $17.7 billion
• Recreational travel services - $12.2 billion
• Business travel services $3.0 billion
• Legal, accounting and management consultancy services - $2.7 billion
• Passenger transport services - $2.7 billion
• Other transport services (including cargo and baggage handling services, agents’ fees associated with freight transportation and airport and port charges) - $2.3 billion

Why is it important to open services markets?

Services play a major role in all modern economies. Indeed, it would be difficult for any economic activity to take place without services such as telecommunications, banking and freight logistics. Services trade accounts for around 50% of GDP for developing countries and around 80% for developed countries.

An efficient services sector is critical to trade and economic growth.

Encouraging greater trade in services through open markets and non-discriminatory treatment can lead to higher employment levels, higher incomes and higher standards of living.

The opening of certain sectors to competition provides consumers with access to a broader range of services and a greater depth of expertise from here at home and overseas. Freer trade also encourages local providers to be more innovative and efficient in delivering competitive services.

The importance of services to global trade

Trade in services is an increasingly important part of global trade and in coming years, the services sector is likely to be the most strongly growing sector in global trade. Given the importance of this sector to the Australian economy, Australia takes a leading role in the Doha Round of negotiations in the WTO. Australia also promotes improved services exports through APEC and the negotiation of comprehensive Free Trade Agreements.

Services are an important driver of growth, especially in developing countries.  Developing countries are increasingly aware that efficient services industries, supported by good domestic regulatory systems, are an integral part of economic growth. Services sectors already make major contributions to the GDP of many developing countries. Services trade, such as tourism, is also an important income source in the economies of the 50 least developed countries (LDCs). Developing countries have considerable expertise in a number of fields, such as port and shipping services and construction services. With their lower labour costs, developing countries have a comparative advantage in many of the more labour-intensive services.

Services negotiations in the Doha Round offer important opportunities for both developing and developed countries. By opening their own services industries to foreign suppliers, they are able to increase the efficiency of their economy. This is especially important in sectors such as freight logistics, power and financial services, which are all critical to inducing greater foreign investment, and economic growth. Developing countries also benefit from the market access commitments made by other WTO members.